- Gold retreats after earlier bounce to $3,325; sellers return as yields and US Dollar regain footing.
- Fed Minutes eyed for clarity; dovish surprise could reignite Bullion’s stalled rally.
- Goldman Sachs urges higher Gold allocation amid geopolitical risks and central bank demand.
Gold price extended its losses during the North American session on Wednesday after hitting a daily high of $3,325 earlier in the day as market sentiment shifted sour. Nevertheless, sellers stepped in, driving the yellow metal prices below $3,300, resulting in a solid 0.18% decline.
Price action has remained calm as traders await the release of the Minutes of the latest Federal Reserve (Fed) meeting at 18:00 GMT. Although it could move the markets, Fed officials have expressed that they are in wait-and-see mode, trying to assess the impact of tariffs imposed by the United States (US).
Bullion’s rally appears to have stalled during the week as US Treasury bond yields recovered some of the previous week’s fall, underpinning the US Dollar. However, a surprise dovish tilt in the Minutes, the less likely scenario, could drive XAU/USD prices higher.
On Tuesday, Fox Business News Gasparino, in a post on X, revealed that a framework between the US and India is close to being announced. It should be noted that the US has taken a more flexible approach to trade talks.
Despite this, the Gold upside remains due to increasing geopolitical tensions between Russia and Ukraine, as well as the Middle East conflict involving Israel and Hamas.
Goldman Sachs analysts recommended a higher-than-usual allocation to Gold in long-term portfolios, revealed Reuters. They cite elevated risks to US institutional credibility, pressure on the Fed, and sustained central bank demand.
Ahead in the week, the docket will feature the Fed’s Minutes, the second estimate for Gross Domestic Product (GDP) in Q1 2025, and the Fed’s preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index.
Gold daily market movers: Bullion retreats on strong US Dollar and high US yields
- US Treasury bond yields are rising as the 10-year Treasury note yield increases by four and a half basis points (bps) to 4.493%. Meanwhile, US real yields also advance four bps at 2.171%.
- The US Dollar Index (DXY), which tracks the buck’s value against a basket of six currencies, rises over 0.33% to 99.89, fueled by an improvement in Consumer Confidence data, which grew the most in four years, revealed the Conference Board .
- New York Fed President John Williams said that inflation expectations are well-anchored and added that he wants to avoid inflation becoming highly persistent, as that could become permanent.
- Data revealed that Gold imports to Switzerland from the US rose to its highest level since at least 2012 in April.
- Besides this, Reuters revealed that “China’s net gold imports via Hong Kong more than doubled in April from March, and were the highest since March 2024, data showed.”
- Money markets suggest that traders are pricing in 44.5 basis points of easing toward the end of the year, according to Prime Market Terminal data.
Source: Prime Market Terminal
XAU/USD technical outlook: Gold price pullback to challenge $3,250
Gold prices have consolidated within the $3,280-$3,330 range over the last four trading sessions, as bullish momentum appears to be fading due to technical reasons. Momentum, as measured by the Relative Strength Index (RSI), is aiming toward its 50-neutral line, which if broken, could sponsor a leg-lower in XAU/USD prices.
For a continuation of the uptrend, bulls must clear $3,300, $3,400 and the May 7 swing high of $3,438. If achieved, Gold’s next goal would be $3,500.
On the downside, Gold tumbling below $3,250 could expose a move to the 50-day Simple Moving Average (SMA) at $3,211, followed by the May 20 daily low of $3,204.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
